Saturday, March 27, 2010

On March 23, 2005, an Isomerization Unit at BP's Texas City (Texas) Refinery exploded, killing several people and injuring more than 100 others. Five years have now passed since that day, and it is well to pause to remember.

To those who lost family members and friends that day, we remember their loss and offer condolences. To those who were injured and survived, this is not likely to be a good memory. I hope that each has fully recovered and has a good life.

From the industry/government/legal standpoint, many things have happened. The refinery had a major overhaul, with more than $1 billion spent to improve safety. Other refineries saw this as a grim reminder of what could happen. I personally made several speeches to refining and engineering groups on this explosion and the legal effects, and heard more than once a top executive tell his forces that such an event would ruin the company. It appears that BP spent more than $4 billion to settle lawsuits, pay fines, and upgrade the refinery. Few corporations could survive such a financial hit. In a way, that is a very good thing, as it may have (and I believe it did) cause others in the industry to think and act to prevent such an event.

OSHA and Chemical Safety Board both stepped up their efforts in monitoring refineries to increase safety.

The industry is currently in a down economic phase, which is likely to persist for years. As I wrote here, crude oil runs to refineries has been decreasing since 2005, and is likely to continue as improved car mileage standards (CAFE) go into effect. One result of reduced refinery runs is positive, others not so positive. One positive is that refining equipment may not be pushed to the limit (not always true, but sometimes it is), which has an impact on process upsets. A negative effect is that refiners may cut maintenance expenditures to ease the financial losses, which can make refineries less safe. Some refineries are shutting down, as they are no longer profitable to operate. Meanwhile, at least three projects are underway in the USA to increase a refinery's capacity, although these were planned and started before the current economic recession. Added capacity will create more strain on the industry, creating additional losses.

One can only hope that decision-makers in the refineries will do the right thing, and shut the refinery down rather than let it run without proper maintenance. We do not need another explosion.

Sometimes, the California Air Resources Board does some simply amazing (read: ludicrous) things. This week saw more than one, as discussed below. The language chosen for this missive is quite instructive. The ARB ship is in quite a panic over the looming possibility that AB 32 will be consigned to the big landfill in the sky, in November 2010's elections. (see this link for the ARB pronouncement, reproduced in its entirety below)

SACRAMENTO (3/22/2010)-Chairman of the California Air Resources Board issued the following statement on the study released today by the AB 32 Implementation Group on the implementation of AB 32, California's climate plan: "This study was conducted by a group dedicated to protecting oil companies and fighting environmental laws that hold them accountable for polluting our environment. It comes as no surprise that their findings support oil companies and oppose clean energy laws Californians overwhelming support. The California public isn't going to fall for the claim that continued dependence on imported oil is better for the economy than switching to more energy efficient vehicles and cleaner renewable energy which will result in green technology job creation and a cleaner environment." [emphasis added]

Because this is so carefully worded, I deconstruct this below, and offer a few comments. (my emphasis in bold)

"This study was conducted by a group dedicated to protecting oil companies and fighting environmental laws that hold them accountable for polluting our environment."

The AB 32 Implementation Group (link here), has dozens of members that includes environmental organizations, with quite a few chambers of commerce. The members range from small businesses to large. One must wonder if AB 32 Implementation Group has a basis for a defamation lawsuit, based on the mis-characterization by ARB. As to protecting oil companies, they are quite able to protect themselves. It is quite obvious that oil companies have a great deal of practice in that, as they are attacked at every turn and almost daily.

But really, ARB, must one go on and on about oil companies polluting our environment? Would you really like to live in a world without oil? Do you realize how much the oil companies (and by extension, natural gas) have done to REDUCE pollution in the atmosphere and elsewhere? As I wrote here:

"Petroleum has brought the world un-ending prosperity, health, wealth, medicines and materials undreamed of, and saved the planet by cleaning the air we breathe from coal-based and animal dung-based odors and particles.

Petroleum is the only resource that provides heating, electric power, transportation fuels, lubricants, chemical precursors, waxes, and many others. No other resource can do what petroleum does, not coal, not nuclear, not wind, not wave, not solar, not geothermal, and at such a low cost.

Rather than vilifying the petroleum industry, you should be praising it – and by extension, the natural gas industry - for all the good that it has brought mankind."

Next, ARB writes that "

It comes as no surprise that their findings support oil companies and oppose clean energy laws Californians overwhelming support. "

Note what ARB is trying to do here: turn the conversation (spin is the in-vogue word) so that "evil oil companies" are the focus. Why not tell the truth, ARB, and admit that AB 32 will have an enormous detrimental impact to ALL businesses in California - any business that purchases electric power, or gasoline, or diesel fuel, or any goods that move by diesel-powered trucks, which does include oil refineries, of course, but also millions of small businesses? Why the spin and focus on oil companies? Likely it is because in this battle of wits, ARB is out of ammunition and must resort to the tired old litany of "blame the oil companies." Why not admit that the Renewable Portfolio Standard, for one thing, does not impact the oil companies but instead attacks the electric power providers, such as PG&E and Southern California Edison?

As to opposing clean energy laws, who says those laws are good? California already has the most clean energy of any state, expressed as a percent of total electric power sold in the state. As a direct consequence, California also has one of the highest prices for electric power in the country. Yet, more renewable power is mandated under AB 32, with 20 percent required by this coming New Years' Eve, 12/31/2010. Thirty-three percent is required by 2020. If renewable power is such a good thing, why isn't the marketplace providing it without government mandates? After all, automobiles were made and sold in the millions early in the 20th century - and no law required that. Personal computers were unheard of 50 years ago - but began selling by the millions and billions when some smart guys starting making them - with no law requiring that. Same for cell phones. Same for hundreds of useful products and services (cable TV comes to mind).

The "overwhelmingly support" line is just not true, and ARB will soon find this out after the election. Californians want jobs, want to earn a living, want to have an income with which to pay their bills and take care of their families, as do most all people. Polls show that global warming is not a priority for most people, and the science is shown to be bunk. Even if there were something to the idea that CO2 causes global warming, California is far too small to make any difference. California consumes approximately 2 percent of all the energy in the world. Reducing that 2 percent by one-third, as AB 32 is supposed to do by 2020, will make no noticeable difference.

"The California public isn't going to fall for the claim that continued dependence on imported oil . . . "

Ah, now we see another switch, this time to imported oil. Hey, ARB? Isn't AB 32 supposed to be about stopping global warming? I read the entire law, several times, and did not see a reference to imported oil. In fact, no reference to oil, period. So, why the switch? Why are you not focused on the global warming disaster looming over us all, and how AB 32 will heroically rescue the world from that doom? Imported oil? Grasping at straws here, ARB. Comical, really.

Actually, ARB, the USA has been using less oil for the past 5 years (since 2005). Total crude oil runs to refineries has been dropping, and is expected to continue doing so. How can that be, ARB, since AB 32 was not even passed until 2006?

"is better for the economy"

Is ARB actually stating that importing oil is bad for the economy? Really? After decades of importing oil (from numerous countries, not just the Middle East), ARB wants to show that importing oil depresses an economy? How then, does ARB explain the Reagan-era economic boom (20 years at least) - yet the USA saw increasing amounts of imported oil? Distraction is a key debate tactic, but to be used only when one knows the debate is lost. Is the debate lost, ARB?

“than switching to more energy efficient vehicles . . . “

Here, ARB pulls out the more efficient vehicles topic, which does exist in AB 32 as the Pavley Standards. Note that ARB has relaxed the Pavley Standards, to match those recently imposed by the Obama administration for the entire country. More energy-efficient vehicles (ARB, yes, there is a hyphen in that phrase) may be very bad for the economy, as consumers find the added cost not worth the savings in gasoline. I wrote on this in several places, but the fact is that with gasoline price below $3, it is very difficult to justify hybrid technology with its added costs. No mention of that, ARB? Why not?

“and cleaner renewable energy . . .”

Now ARB again brings up cleaner renewable energy, but the same questions remain. How much will each consumer's electric power bill increase, and how will that higher price of power influence business decisions on when to leave California and start up somewhere with lower power prices?

“which will result in green technology job creation . . .”

Green technology job creation is ARB's standard line with AB 32. Yet, independent studies show that AB 32 will kill jobs - and ARB knows this. If green policies created jobs, why is California having such great unemployment? This state should be booming with economic activity, with all the environmental restrictions on air pollution, the California emissions laws on cars that for many years made California cars different from all others in the US, with California gasoline regulations unique in all the US, and many others. Where are the green jobs, ARB?

“and a cleaner environment."

ARB finally gets to the old stand-by, we need a cleaner environment. How clean, ARB? At what price, ARB? At what point do jobs and economic activity take priority over some arbitrary clean-ness of the air? How many auto assembly plants still operate in California, ARB? There have been many new plants built in the USA in the past 20 years, how many were in California? California already has the most restrictive air pollution laws in the USA, probably on the planet, so much so that economic activity is adversely affected. And now, ARB wants even more.

In conclusion, it is actually comical to watch ARB thrash about in such obvious pain over the specter of AB 32 being repealed, by the voters at the ballot box. Please, ARB, try to remember the basics of AB 32. It's in the law. The law states that CO2 causes global warming, and AB 32 is the Global Warming Solutions Act. There is nothing in the law about oil, imported or otherwise (there is one mention of petroleum, with reference to refineries). Experienced and independent analysts have repeatedly shown that forced measures of AB 32 will kill jobs, increase prices, decrease disposable income, and cause business to not choose California as their home.

Saturday, March 20, 2010

It is becoming more and more apparent that the U.S. must transfer some of the excess water that floods the Mid-Western states to the dry Western states. My colleagues and I have been researching this for several years, and have some ideas. We conclude that it is in the national interest to do, and should be a no-brainer. The figure below shows the status of river flooding in the U.S. as of March 20, 2010.

Ancient civilizations realized the critical need for water, and did what it took to move the water to where it was needed. The Romans of course built their famous aqueducts, and the ancient Chinese routed water also. Many others did, too.

While the current Presidential administration is passing out money as if it grew on Sequoia trees, this is a project that should be on the list.

California has an extensive history with water projects, with routing water from the Sacramento River south to Los Angeles, from the Owens Lake area to Los Angeles, and more recently the Colorado River to Los Angeles and San Diego. However, none of these is adequate given the growing California population, droughts, and decreased snow in the Sierra Nevada Mountains.

An amazing fact is that water pumps consume approximately 10 percent of all the power sold in California. Some of that is recovered as hydroelectric power. The recovery of power from water factors in this.

One possibility on the national level is a water transfer system from the Missouri River at Kansas City, that runs approximately 800 miles southwest to the continental divide in New Mexico, just south of Interstate 40. From there the water would flow into tributaries of the Colorado River. The hydroelectric plants are already in place on Hoover Dam and Glen Canyon Dam. Therefore, some of the power expended to pump the water uphill and 800 miles would be recovered. The elevation change is on the order of 6,000 feet.

The water route will be through the U.S.' great wind corridor, so it is conceivable to use windmills to provide energy to the pumps. How the water is transferred is of course an engineering problem, one solution is to use a buried pipeline, or build a series of open canals with a slight downward slope to the southwest, and install water lift (pumping) stations at regular intervals. Something of the same magnitude was done by the construction of the Erie Canal in New York, which runs approximately 365 miles, and 600 feet uphill. It took 8 years to build and was finished in 1825.

This is the type of project that has enormous benefits for almost all Americans, and would certainly be less expensive than building and operating desalination plants using reverse osmosis. The existing lakes Mead and Powell could store the water as necessary. One benefit is an assured supply of agricultural products from the fertile but arid California farmlands and dairies. California supplies a large part of the nation's foods, when there is adequate water.

An advantage of the buried pipeline alternative is no water loss due to evaporation, but a disadvantage is higher initial cost, and higher pumping costs due to friction as the water flows through the pipe.

An advantage of the open canal design is lower pumping cost, but a disadvantage is slight water losses due to evaporation.

The amount of power required to pump the water is tremendous, at roughly 800,000 HP for a flow of 1,000 cubic feet per second.

Given a simple design of 800 miles broken up into 10 mile sections of canal, with a pump at each section, would require 80 pumping stations at 10,000 HP each. The 10,000 HP is roughly 7.5 MW of energy. Of course, an actual design would follow the contour of the land and have pumps sized appropriately for each section. Even if all 80 pumping stations are built, the amount of power required is approximately 600 MW.

The Missouri River flow varies of course, but is somewhat regulated by a series of flood-control dams upstream. The USGS shows the typical flow is about 4,000 to 5,000 cubic feet per second. Therefore, diverting 1,000 cubic feet per second would not likely be a problem. Diverting twice that amount, or three times that amount, could conceivably cause problems.

This would be a job for the Army Corps of Engineers, and is a worthy challenge to their expertise.

My proposed National Excess Water Transport Aqueduct Project (NEWTAP) as described above will go a long way to solving a couple of problems. First, and obviously, is the chronic water shortage in California and other western states, and flooding along the Missouri. Second, what to do with wind power in the Plains when the power demand is in the big cities (the lack of transmission lines problem).

A further improvement on this plan is to also divert a portion of the upper Mississippi River west and into the National Excess Water Transport Aqueduct Project. One possibility is a 150-mile canal due west along US route 36 from Hannibal to St. Joseph. This would allow a water flow of approximately 2,000 cubic feet per second, or more.

The water transfer to the Colorado River would eliminate the need for power transmission lines, because power would be generated at Glen Canyon Dam and Hoover Dam, then sent to Southern California or elsewhere through existing transmission lines. Thus, there would be some savings by not having to build power transmission lines to connect the wind-generators to cities.

A useful means of storing excess wind-generated power is to pump water uphill for later use in hydroelectric plants when the power is needed. This trans-continental, uphill waterway would do exactly that, storing the water in Lake Powell and Lake Mead.

I see no technical reasons why this would not work. Crossing existing creeks, rivers, highways, railroads, and hills, can all be done. However, on the legal and environmental side, there are more difficulties. There is a water-rights legal issue of transferring water from one water basin into another. This plan would transfer water from the Missouri water basin across a couple of other basins and into the Colorado water basin. Then there are the eminent domain issues to acquire the right-of-way. This is not a problem, if the governments decree the project is in the public interest. In practice, though, such decrees at times generate public hostility. Finally, the environmental issues are rather large. One can envision the EIR (Environmental Impact Report) for an 800-mile canal crossing several states!

Still, such a project would be of ultimate good. The money spent would provide employment for thousands, and for many years. The energy generated by the windmills would be recovered (at least in part), which is in line with the “Generate Green” movement. That is far better than building a few nuclear power plants. And the water would go to good use, irrigating farms to feed the U.S. and the world.

Note: this is a copy of two articles I wrote in February 2009, when the Spring flooding began (as usual) on the upper sections of the Mississippi, Missouri, and the Red River in the Dakotas. The flooding has started again this year, and practical solutions such as the ones suggested here should be put in place.

Friday, March 19, 2010

A few days ago, I wrote on a couple of publicly available "green funds" for investors who hope to capitalize on the booming upward trend in companies and corporations that sell goods or services that will be in demand more and more, when and as man-made global warming causes the Earth to begin its roasting stage. We've read about or heard all the predictions of doom: melting ice caps, disappearing glaciers, rising sea levels, coastal and island flooding, population relocations, intense droughts, huge hurricanes, prolonged and unprecedented heat waves, widespread tropical disease, crop failures, snowpack melting in the California Sierra Nevada mountains, and all the rest. The two funds, GWO and PBW, each consist of approximately 50 publicly traded stocks, with GWO having a world-wide base, and PBW drawn only from the U.S.A. Neither fund is doing very well, in fact, both are in the tank, and each fund's price is heading downward. That is odd, as surely there are savvy investors looking to place their money into a sure thing like global warming. After all, the scientists have spoken, and their words were of impending heat and doom. The science is settled, they said. The small matter of the East Anglia University emails and computer code, and the errors in the IPCC summary report are merely distractions, they said. The point of no return has already passed, they said. There is warming in the pipeline that we cannot avoid, they said. We need a global treaty to make every country do its fair share, and the rich countries must pay so the poor countries can have a chance for survival. But, apparently not, at least in the view of experienced investors. GWO and PBW are not rising at all lately, but are sinking. So much for the publicly traded firms. How about privately-held firms, those funded with venture capital?

One of the popular themes over the past few weeks, at least in California, has been the huge amount of venture capital that has poured into the state as funding for green technologies that will create millions of new jobs, clean jobs, in industries that do not produce CO2, and will pull California out of the economic slump and make it the envy of the world. This theme is trumpeted by those who wrote and signed AB 32 (State Senator Fran Pavley and Governor Schwarzenegger), and by many others who oppose the upcoming ballot initiative that will suspend AB 32 for several years. So, I took a look around to see where these green startups are, what they are doing, who is funding them, and, more importantly, when was the funding made. That last point is key, and more on that in a moment.

I found that most of the work has already been done, at least through 2009, at this link. The authors listed 50 startups, all funded by VC (venture capital), and all in the "greentech" sector. The technologies range from solar panels to solar power towers to innovative software to smart grid hardware, to green buildings, green algae that produces hydrocarbons from sunshine, to batteries and electric cars. The common attribute for all of these is that none will be economically competitive on their own, were it not for government subsidies and laws that require such goods. In fact, none would be competitive with crude oil at $80 per barrel, but might be attractive if oil were at $150 to $200. Rather than re-hash the list of 50 companies, I'll leave that to readers to pursue the link and read them there. I want to focus on the funding and the timing.

The article shows a chart (see below) with VC funding in greentech for each year from 2005 through 2009. Not surprisingly, 2008 had the greatest annual investment with almost $8 billion. Each prior year was smaller, leading up to the peak year of 2008. Then, 2009 dropped of to just under $5 billion. That is rather curious, too.

A better explanation for VC funding is the price of crude oil. Crude oil price peaked in 2008, at around $140 per barrel. It very likely appeared to the VC firms that the greentech would be attractive, especially if crude oil increased to $200 per barrel. Then, in 2009, crude oil dropped back to the $70 and $80 range, along with a reduction in VC investment into greentech. This, then, is the key. As the OPEC countries have learned, high crude oil price leads to innovations and lower demand for crude oil.

Finally, VC-funded enterprises have a dismal track record of success. Very few companies ever make a product that catches on in the market, and the same can be expected from these.

It is puzzling to read and hear AB 32 supporters with their claims that greentech VC funding is due to the laws incorporated in AB 32. There has been some investment, but not all that much. Plus, with the price of crude oil down from the 2008 peak, the funding is reduced. The final reality for the AB 32 proponents is that very few jobs have been created by the VC funded greentechs. What California needs is a million reliable jobs that produce goods and services that are competitive in a world market. These VC greentechs do not provide those jobs.

Monday, March 15, 2010

Much has been written lately on the advantages and disadvantages of California's Global Warming Solutions Act of 2006, also referred to as AB 32. This has become a hot topic, for at least two reasons. First, California Assemblyman Dan Logue initiated a bill to suspend AB 32 until the economy recovers from its present shambles (unemployment is 12.5 percent officially, and more likely 18 percent actually). When Logue's bill was defeated in the legislature, he started a ballot initiative for the November 2010 election so the people of California can vote on the issue of whether to suspend AB 32 or not. Logue's actions drew considerable ink in the press and the internet blogs.

Second, Republican Gubernatorial candidate Meg Whitman announced that her first act as Governor, should she be elected, will be to suspend AB 32 for one year. That position is in direct opposition to the leading Democrat candidate, presently Attorney-General Jerry Brown. Brown is on record as fiercely supporting the entire man-made global warming theory and AB 32. Whitman's statement also drew considerable ink.

Recently, the "google alert" that I set up for AB 32 has notified me of several publications each day, indicating that AB 32 is in the news much more than was the case just a few months ago. There are two basic camps, one for suspending the law until unemployment drops to 5.5 percent, and the other for pushing AB 32 to the limit. The impact on jobs, especially California jobs, is part of the disagreement. Proponents, including Governor Schwarzenegger, claim that the law will create jobs. Opponents state that the law will kill jobs by forcing companies to close their doors or move away from the state.

I am on record supporting the opponents, and have been since I first read this law several years ago. I have made speeches across the country on what AB 32 requires, and how it will kill the economy.

The fact is that yes, some jobs will be created by AB 32, and some jobs have already been created by AB 32. Chief among these are the consultants for ARB who perform studies, and those who write the regulations themselves. The regulations are complex and time-consuming, and will not be finished until late in 2011. There are also some reporting and auditing requirements already in place, and each of these functions requires people and creates jobs. There are also some new businesses funded by government (both federal and state) that seek to create markets and market share for the new "green economy." There also is some private venture capital that funds startup businesses in the green economy (more on that in a moment). Yet, the number of these jobs is very small. The unemployment in California overwhelms these tiny job numbers.

Proponents like to use an old but trusty statistical trick when the numbers are not in their favor: they resort to percentages. It works like this: if there are 100 people in a brand-new industry, doubling the number of people in that new industry creates only 100 jobs. But, out of a workforce of 16 million (the rough number for California's work force), no one wants to brag that their new industry created only 100 jobs in a year. Instead, one can say that the industry had a 100 percent job growth in that year. That sounds much more impressive. So that is what the AB 32-is-creating-green-jobs group does. They trumpet the percent increase in jobs. One report has it that green jobs are growing at 5 percent per year. That is a ridiculously low growth rate, and even more so because of the very low starting numbers. The proponents are grasping at whatever weak arguments they can find.

The proponents next argue that AB 32 is creating and will create millions of jobs in fabulous new industries that do not produce CO2. It is notable that few, if any, of these proponents are engineers and understand what they are talking about. As I have written elsewhere, fundamentals of physics can not be violated, ever. The key to green jobs' success is alternative means of producing energy; energy for electricity, for transportation, and for heating and cooling.

The reality is that we have had the means to produce energy without producing CO2 for many decades. The only question is one of economics, that is, how much will the energy cost when produced in this way. Whether the energy is from solar, wind, geothermal, fuel cells, or from fossil fuels with complete CO2 capture and sequestration, the technology exists. One problem for the AB 32 proponents is that fossil fuels are too cheap, so that their pet technologies cannot hope to compete. The governments (state and federal) have entered the fray, with mandated minimum production rates for renewable energy, and with liberal funding for the renewables. Examples of mandates include the Low Carbon Fuel Standard for biofuel usage in California, and the Renewable Portfolio Standard for solar, wind, geothermal, and a few other non-fossil fuel power sources. There are federal mandates for ethanol in gasoline, also. The governments have also mandated less transportation fuels be consumed, by increasing automobile mileage standards, and providing incentives for the purchase of hybrid vehicles.

There are industries and businesses working heroically to install solar power plants, wind-power plants, geothermal power plants, and fuel-cell power plants, all in an effort to make money and comply with the government's mandates. All of these non-CO2 power plants produce power but at much higher power prices compared to conventional fossil fuels. And that creates the argument for the opponents of AB 32. No matter what government-funded studies conclude, the reality is that private businesses must pay their bills, or go out of business. Some will declare bankruptcy. One of the bills that must be paid is the electric bill. As that bill increases due to high-cost renewable power plants, businessmen will find it more and more difficult to keep their prices low and compete with other providers of their products and services. California businesses must increase their prices or lose money. There are other bills to pay besides the electric bill. Diesel fuel must be purchased, if the business ships any goods to customers, or sends out workers to a job in a diesel-powered truck. Raw materials must be purchased, and their costs will also increase because they, too, arrived on a truck powered by diesel fuel. The price of diesel fuel is increasing because of AB 32 bio-fuel mandates. Finally, the employees will find that their wages do not extend as far as they did previously, primarily because the workers' electric bills at home went up, the grocery bill went up, purchasing a new car is much more expensive, and purchasing gasoline for the car (no matter if the car is new or not) costs much more due to the ethanol that must be added to the gasoline.

There are also increases in the water bill for all customers, entirely due to the increased electricity prices. Pumping water in California consumes great quantities of electricity, and the price will go up.

Throughout the history of capitalism and business schools, one key to success is to grow a business by reducing the costs of running the business. This is elementary, and is true because it works. Businessmen, and their consultants, devote much time to analyzing existing costs and evaluating alternatives to reduce those costs. Installing labor-saving devices such as computer-controlled machinery reduces the payroll and eliminates jobs. Installing a more efficient machine that uses less electricity, or produces less waste from the raw material, or uses an entirely different process, also cuts costs. Shipping products in bulk instead of small quantities reduces costs. Training employees to be more productive allows more product to be made with the same payroll costs. Each cost reduction allows the business to reduce the product price, thus gaining a competitive advantage when customers buy his products rather than the more-expensive products from another manufacturer.

And now, AB 32 proponents want to defy all the wisdom of all the business schools and the decades and centuries of hard-earned experience gained by tough, seasoned businessmen. AB 32 proponents want to increase the costs of doing business in California, and they claim that by doing so, more jobs will be created. Does anyone see this as nuts?

There are many businesses in California that cannot make further improvements in energy efficiency, because for many years they have been mandated to invest in "Best Available Control Technology." There are no inefficient motors remaining to replace, in their businesses. They must, however, pay the higher price for electricity as the renewable power plants cause power prices to increase. They might install cogeneration power systems, but those are mainly already done in California. For a small businessman, installing cogeneration is almost always not cost-effective, so that will not occur.

That then, is the problem with AB 32. Costs on almost everything will increase, from water, to electricity, to gasoline, to diesel fuel, to groceries, to goods in shops and malls, even coffee at the local coffee shop. As a colleague stated, if any of these changes were economically attractive, businesses would already be jumping on them without any government prodding. The fact that they have not is a clear indication that costs will go up under AB 32.

Because of all the above, I am firmly against AB 32. I will place my name on the petition to place the Suspend AB 32 initiative on the November ballot. And, I will vote to suspend AB 32 in November.

Saturday, March 13, 2010

Dr. Pierre Latour, PhD and PE in chemical engineering and PE in process control engineering, has another excellent publication in February 2010's Hydrocarbon Processing magazine. He sent me an advance copy of the article some months ago, and it is good to see it published in such a prestigious journal, especially given prominence in the Editorial section. The article is available here, with a free registration required (email and password). (scroll down to Editorials, and click on "Engineering Earth's Thermostat with CO2") NOTE: HP makes the editorials available for free only for the current month. Previous months' editorials are archived and require a subscription to view.

For those unfamiliar with the world of oil refining and petrochemicals, Hydrocarbon Processing is one of the premier journals for that industry, is read world-wide by many thousands of industry professionals, and is in public and private libraries around the world. It dates back to at least the 1960's. In my world-wide travels during the past 30 years, HP has graced the coffee tables in lobbies wherever I went. Copies are circulated to engineers and management in almost every refinery and petrochemical plant. As a personal note, I have the honor of having an article published in HP in the March 1998 issue.

In his recent HP editorial, Dr. Latour lays out the case for why regulating CO2 in the atmosphere will not cause any change in the earth's temperature. The key quote is

"CO2 only absorbs and emits specific spectral wavelengths (14.77 microns) that constitute a tiny fraction of solar radiation energy in Earth's atmosphere. The first 50 ppm of CO2 absorbs about half of this tiny energy, each additional 50 ppm absorbs half of the remaining tiny fraction, so at the current 380 ppm there are almost no absorbable photons left. CO2 could triple to 1000 ppm with no additional discernable absorption-emission."

Dr. Latour is absolutely correct, and the IPCC and other climate alarmists are wrong. One does not violate the fundamentals of engineering, especially process control engineering. Not even IPCC scientists can do that, mightily though they strive.

A previous article on SLB (found here) discusses Dr. Latour's earlier letters to the editor of Hydrocarbon Processing and why CO2 cannot control the Earth's temperature.

Although one would not know it by reading the press release, California has backed down from its 42 miles-per-gallon car standard that is part of AB 32, the greenhouse gas initiative in California. The state has reduced its standard to harmonize (agree with) the federal standard of approximately 35 miles per gallon by 2016.

This creates a problem for the Air Resources Board, and for some others within California.

The problem is that ARB is mandated by AB 32 to impose regulations on sectors of the economy to achieve a hard limit on CO2 and other greenhouse gas emissions. By relaxing the automotive standards (known as Pavley standards), some other areas must be increased to achieve the overall goal.

The Pavley standard was to reduce CO2 by 27.7 million metric tonnes per year by 2020, at the 42 mpg level. By reducing the standard to 35, the reduction is now about one-sixth smaller, or roughly 4.6 MMTCO2 per year. Some other sector of the state's struggling economy must take the hit, and reduce emissions so that cars can run at 35 miles per gallon.

I propose that the state offices, especially those in Sacramento, shut down their heating and air conditioning systems entirely. This would likely save the required amount of energy, reduce demands on the electric power supply, and set an example for all of us living in the state.

It would also increase the use of personal deodorants, dry cleaning for sweaty clothes, and probably the sale of room-sized fans. In short, revert to the life of the 1940's before air conditioning was wide-spread.

Here's the challenge, ARB. Take the lead. Show us all how it is done. Cut the power to the air conditioning, and to the heating, in all the state offices, including yours. After all, 4.6 million tonnes per year is not much.

As shown in the figure 1 below, California is experiencing a below-average temperature state-wide thus far for March, 2010. Based on the colors and extent of each in the figure, it appears the entire state is approximately 5 degrees F colder than average. Some parts of the desert around Palm Springs are much colder, at 7 to 8 degrees below average.

Once again, it is seen that the entire CO2 is Killing Us mentality is wrong. It must be noted that CO2 continues to increase in the atmosphere, with January 2010 showing 388.33 ppm (by volume, dry basis). It was approximately 340 ppm just 30 years ago, in 1980.

The dire predictions of CO2 causing runaway warming, temperatures out of control, abnormal heat waves, ice caps melting, polar bears drowning, sea levels increasing and inundating shorelines, levees washed away, coastal populations left homeless and destitute, increased droughts, melting snowpacks, disappearing glaciers, and all the rest of the scare stories are just not true. CO2 does not have the effect on the world's temperature that the climate alarmists say it has.

At present levels of CO2, doubling or even tripling of CO2 has no measurable effect. The cold temperatures in early March in California show this.

Figure 1 (click for larger view)

Note: image snapshot taken from this site on March 13, 2010. The image is updated daily (except on weekends and holidays) therefore may not show the same image on later dates.

UPDATE 1 - March 17, 2010 - This next figure 2 (below) shows even more cooling compared to the above figure 1. Note the addition of the magenta and dark purple areas, indicating colder than average by 5 degrees F and more. There is one small warmer area, in Orange County (Irvine, California and surrounding areas) shown in yellow. With the month half over, just to return to a normal temperature will require the next two weeks to average 4 degrees above normal. This is not very likely, considering the storms still approaching the state from the Pacific.

Figure 2 (click for larger view)

Note: image snapshot taken from this site on March 17, 2010. The image is updated daily (except on weekends and holidays) therefore may not show the same image on later dates.

Sunday, March 7, 2010

All the model predictions in the world can project or predict warming temperatures, but the reality is found on the farms. Farmers deal with reality every day of every year. Their reality for this year is that they did not achieve proper nitrogen applications last Fall due to cold and rain that made harvesting the corn very difficult. Now, their fields are covered in snow and will be too wet for nitrogen application. And all this, in a global warming condition. Or so the IPCC, Al Gore, the US EPA, and California experts who wrote AB 32 tell us.

The nitrogen application (see photo below) is in the form of liquid anhydrous ammonia, chemical formula NH3. This is the most economic and practical form of nitrogen fertilizer application, as farmers would certainly use another method if it was better. As an aside, NH3 is a major industrial chemical, made in ammonia plants from natural gas. The natural gas (chemical composition CH4) is split in a methane reformer plant into Carbon and Hydrogen. The carbon is reacted with oxygen to form CO2 that is released into the atmosphere. The hydrogen is then reacted with pure Nitrogen to form ammonia. The ammonia is purified, cooled and liquefied, and shipped to the farms. The Nitrogen is produced in an air separation plant by several stages of cooling and chilling until nitrogen and oxygen are liquefied and purified. Each of these processes, air separation and ammonia manufacturing, requires great amounts of energy input. The energy is almost always natural gas for an ammonia plant, and can be electricity for the air separation plant.

(note, the wikipedia article linked above for ammonia plants states that hydrogen will be produced from electrolysis of water rather than reforming of methane. That is a possibility, but would increase the cost of hydrogen many times over. Hydrogen from water is one of the most expensive forms of hydrogen ever devised.)

IFT photos by Gene Lucht

As electrical power prices increase due to mandated renewable energy production levels, the price of ammonia will increase. When and if cap and trade is mandated for CO2 emissions, ammonia plants must increase the price of their product to cover the additional costs of capturing and sequestering the CO2 that is produced.

And thus, corn prices will increase, cattle feed cost will increase, food prices will increase for milk and beef and other animal products that are dependent on corn for feed. Interestingly, ethanol from corn will also increase in price, thus increasing the price of gasoline for all consumers.

As the Spring planting season nears for 2010, we will see exactly how the global warming from man-made CO2 emissions affects the farmers. The IPCC reports predicted longer growing seasons, hotter summers, and more tropical climates farther north than we have ever seen. Perhaps an IPCC author should visit Iowa this Spring, and talk to some farmers about how warm their farms are, and how short their growing seasons have been lately.

Wednesday, March 3, 2010

The percent utilization of oil refineries in the US is picking up slightly, which is perfectly normal for this time of year. Refineries traditionally use the winter months to shut down various units for routine repairs and major overhauls, then start processing again to build up inventories for the summer driving season.

Except this year. The inventories are already built up, and overbuilt actually. Still, refining utilization broke the 80 percent mark this past week, per the EIA, at 81.9 percent. The industry as a whole has excess capacity, leading to low margins and low or negative profits (losses). Refining utilization usually increases approximately 8 percentage points from the mid-February low to the summer maximum, thus this year we can expect approximately 85 to 86 percent utilization at the most. That is not nearly sufficient to bring profitability to the industry, and requires some refineries to permanently shut down. With over-stocked gasoline across the country, it might just be that refineries do not reach the 85 percent utilization this year.

It is also interesting, as I wrote earlier, that the trend in crude oil consumption is downward in the US. Crude oil consumption peaked in 2005 and is not likely to climb again soon, if ever. Peak Oil Demand has already occurred in the U.S. The Obama government is largely responsible for this continuing, having passed the law requiring automobiles to achieve 35 miles per gallon, on average, for new car sales. The rate of gas mileage improvement is much higher than historical crude oil consumption increase, thus oil demand will continue to decrease.

The EPA's logic is all wrong for requiring higher miles per gallon, as they based their requirement on reduced CO2 emissions that supposedly will prevent global warming and a host of disasters resulting, including coastal flooding from rising sea levels, melting ice caps, droughts, heat waves, and others. What will actually happen is that the demand for oil will decrease, the US' imports of oil will decrease, and the balance of payments will improve. At the same time, the price of oil will be somewhat less than it would be without the new mileage standards, which could reduce government tax receipts - those based on a percentage of the gasoline sales price.

It looks like Obama and company got one right - for all the wrong reasons, but it is a good thing when crude oil price drops and less money flows into the Middle East. Now, if they could just cut out the bio-fuels foolishness, which will increase diesel fuel demand because trucks and trains are used to haul ethanol around the country. Those trucks and trains consume diesel fuel, which requires approximately 3 barrels of oil to be refined for each barrel of diesel fuel produced.

Tuesday, March 2, 2010

Water is a critical item in California, and gets far less state-wide attention than it deserves. A recent bulletin from the State has this interesting statement: "less than normal water supply conditions exist." While literally true, there is 2.8 million acre-feet more water in storage today than on the same date last year (per this site). The state's water in storage as a percent of "normal" for this date is just over 86 percent. Thirteen lakes are at or above the normal level for this date, including some of the biggest: Shasta, and Don Pedro.

Meanwhile, the snow pack at last measurement was at 106 percent of normal for that date (about a month ago), and there is more snow falling as I write this, with more on the way. UPDATE: March 3, 2010: The measurement today was reported at 107 percent of normal for this date, compared to 80 percent of normal on this date last year. [end update]

With 15 million acre-feet currently stored, the 2.8 million more than last year represents almost a 25 percent improvement from last year. Not bad. Not bad at all. But where is the positive news? None that I can see. We still hear gloom and doom, drought, water allocations, water shortages, conserve, conserve, do without, spy on and report your neighbors' water use habits, etc.

So, tomorrow (March 3, 2010) the snow measuring crew will be up near Lake Tahoe, pushing their snow sticks into the snow and measuring the depth and water content. From what I hear, they should wear snowshoes. The snow is pretty deep this year. The final measurement will occur on April 1, 2010, and state water policy will be established from that number. Therefore, the more snow and rain that falls in the next 28 days, the better for California.

And now, for the obligatory swipe at the AGW alarmists, especially those in California who passed AB 32, are implementing AB 32, and supporting AB 32 - the bill that will curb or halt CO2 emissions (and halt the California economy) because droughts will be more severe and the snow pack will be smaller and melt earlier. The snow storms apparently cannot hear you.

Monday, March 1, 2010

The first of each month is an interesting day to have a look at CalClim.Dri.Edu's website, because that is the day that they (usually) update their look at the previous month, and post the average temperature deviation for that month on their long-term chart (Figure 1 below). This month, the entire state's average deviation from the long-term norm was plus 0.5 degrees F. They also update their state-wide chart with colors to show temperature for regions of the state. (see Figures 2 and 3 below).

This chart (Figure 1) also has some interesting aspects that bear on the global warming issue that the State of California tells everyone is a dire emergency, and led to the state passing AB 32 to prevent catastrophic changes to the state's climate. One of the key points of AB 32 is that increased greenhouse gases, especially CO2, in the atmosphere will (not may, not might, but WILL) create global warming such that high temperatures will be experienced throughout the state. The high temperatures will (supposedly) create droughts, heat waves, public health difficulties, water shortages, and other unpleasant effects. That is the official California position. But, it appears from Figure 1 below that somebody failed to tell the month of February that little piece of fiction.

The small wavy black line is an 11-year running mean, and it peaked in 1991 and has been falling steadily ever since (almost 20 years now). That is quite odd, actually, since CO2 has been steadily increasing during the entire period from about 1959. If the so-called "science" behind AB 32 were true, one would expect that each February (and the other months in each year) would react properly, and show a general warming trend as the CO2 increases. Clearly, this is not happening. Could it possibly be that AB 32 was based on bad science? Could it possibly be that CO2 does not have the magical powers that the AGW faithful ascribe to it?

Figure 1

(click image for larger view)

February has been a very cold month in Southern California, but one would not know this by looking at the overall map of the state, with each region assigned a color. In Figure 2, there is much blue and green color (colder) in the southern portion of the state, yet in Figure 3, those areas of the state are given a white color, indicating only plus-or-minus 1 degree F departure from the norm. Yet, the blue and green colors in Figure 2 indicate 2 to 3 degrees F departure from the norm. It certainly appears that Southern California, overall, was colder than plus-or-minus 1 degree from the norm, and perhaps most of that white area in Figure 3 should be light green.

Figure 2. . . . . . . . . . . . . . . . . . . Figure 3

(click images for larger view)

Once again, the entire basis of global warming, based on the increase of CO2 in the atmosphere, is shown to be false. It also appears that those who generate the overall state regional chart above (Figure 3) went to great pains to show no cooling this month, or perhaps they just ran out of green ink?

About Me

-- is a California attorney and holds a B.S. in chemical engineering from The University of Texas at Austin. He advises and represents companies and individuals in civil matters related to Science and Technology, climate change, process safety, environmental regulations, engineering malpractice, contracts, Free Speech, Defamation, and related matters. As an attorney who understands engineers, he also works with other attorneys in dealing with expert witnesses and lay witnesses.
Before opening his law office, he worked for 20 years in more than 75
refineries and petrochemical plants in a dozen countries on four continents. email sowell.law.05@gmail.com office ph 805-587-6756